False Claims Act: When A Person or Company Defrauds the Government
In the United States, the federal government is behind many projects and programs. For example, it funds maintenance, public welfare, student loans, and much more. When a person or company defrauds one of these government projects, this can result in criminal charges. Additionally, they can be liable for significant monetary penalties and damages under the False Claims Act.
What is the False Claims Act?
The False Claims Act (“FCA”) is a federal law in which persons and companies can be held liable for defrauding government programs. The law was enacted during the Civil War after contractors sold the Union Army sick and injured animals, inedible food, and faulty munitions.
Because the law was enacted during the presidency of Abraham Lincoln, it has been referred to as the “Lincoln Law.” Since then, there have been amendments to the FCA in 1986, 2009, and 2010.
When a whistleblower files an FCA lawsuit, that person is called a qui tam plaintiff. In those cases, the government can choose whether to intervene. In general, suits where the government gets involved are more likely to result in settlements and judgments (and in higher amounts).
Key Points in the False Claims Act
In cases where whistleblowers bring an action under the FCA, the whistleblower can receive up to 30% of the government’s recovery. This provides strong incentive for people to come forward when they know the government is being defrauded. Additionally, the whistleblower has some protections under the FCA from retaliation.
The law also permits lawsuits to proceed even when the perpetrator doesn’t have actual knowledge of the fraud. In some cases, “knowledge” can include reckless disregard or deliberate ignorance by the perpetrator. Moreover, contractors can also be found liable for false claims – whether submitted directly or for causing such a submission to the government.
If an individual or company is in violation of the FCA, the penalty can be in excess of $20,000. But this is not just per case – this is per fraudulent transaction. In addition to that penalty, the perpetrator must pay treble damages, meaning three times the amount of damage to the government. A perpetrator must also bear the costs of the lawsuit.
New York’s Law on False Claims
New York is one of more than 30 states which have passed their own laws like the FCA. Specifically, this law allows for lawsuits against those who defraud state or local governments. Similar to the federal law, the civil penalty can be three times the damages sustained by the government. Whistleblowers can also receive a substantial portion of the money recovered, along with legal costs.
New York state’s FCA is noted for allowing for liability for tax claims, which are specifically exempted under the federal FCA. Additionally, New York City has its own version of the law.
References:
- 31 U.S.C. §§ 3729 through 3733, False Claims Act. Available at: https://www.law.cornell.edu/uscode/text/31/subtitle-III/chapter-37/subchapter-III (last accessed Jan. 18, 2023).
- State Finance Law §§ 187 through 194, New York False Claims Act. Available at: https://ag.ny.gov/sites/default/files/nyfca.pdf (last accessed Jan. 18, 2023).
- NYC Administrative Code §§ 7-801 through 7-810., New York City False Claims Act. Available at: https://www.nyc.gov/assets/law/downloads/pdf/NYC_False_Claims_Act.pdf (last accessed Jan. 18, 2023).
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